News
A RISING VOICE AND POWER - THE VOCIFEROUS MINORITIES AT THE ANNUAL GENERAL MEETING OF MALTON BERHAD ON SATURDAY, 15 DECEMBER 2006
18 December 2006
On 16 December 2006, Encik Abdul Wahab Jaafar Sidek, the Chief Executive Officer (CEO) of MSWG and minority shareholders of Malton Berhad dressed down the board for the absence of their executive chairman and executive director for two consecutive annual general meetings (AGMs) as well as their excessive remuneration when shareholders received no dividends. At several points during the three-hour shareholders’ meeting, the aggrieved shareholders put pressure on the board, demanding the whereabouts of the Executive Chairman and the executive director. In the annual report, they are both substantial shareholders via a private limited company, Malton Corporation Sdn Bhd which has a 37.91 per cent stake.
Encik Abdul Wahab Jaafar Sidek pointed out that their absence did not reflect well on their attitude and their responsibility for not taking minority shareholders seriously at once a year’s shareholders’ meeting. He and minority shareholders present at the AGM found that the Deputy Chairman, chairing the AGM (also an independent director)’s explanation is totally unacceptable by saying that they were overseas and that he would convey shareholders’ sentiments to them. As he tried, chairing the AGM not even passing the first resolution in tabling the company’s financial statements, the CEO of MSWG and shareholders viewed their absence with skepticism and the chairman’s explanation unconvincing. Also noted in the directors’ profile in the annual report, the Executive Chairman has been described as the executive director’s spouse.
MSWG then brought up several critical issues to the board’s attention and shareholders followed up vociferously, demanding for answers. The most critical ones, among others, are as follows:-
The AGM got heated, with shareholders refusing to accept the explanation for their absence and inappropriate answers provided by the board to the above issues. At this juncture, Encik Abdul Wahab Jaafar Sidek virtually advised the board to consider the necessity to adjourn the AGM which was well supported by the shareholders. He hoped that the adjourned AGM would enable both the executive chairman and executive director be present at the AGM to meet shareholders. At this stage, the Chairman (supposed to be an independent director) asked for a poll instead of a show of hands.
MSWG then took to account whether or not the chairman had conducted himself appropriately as an independent director chairing the AGM while faced with mounting objections from shareholders. The shareholders gathered that the board wanted to get over the AGM with probably proxies and the poll to see to their success easily over the aggrieved shareholders. Much arguments, persuasions and exchange of words between shareholders and the Chairman of the AGM prevailed, culminating with directors requesting to meet among themselves for ten minutes. Only then, they reluctantly decided to adjourn the AGM to another date.
MSWG is of the view that the affairs at Malton Bhd’s AGM have, if nothing else, shown that minority shareholders have ‘teeth’ and will bite whenever their patience is over-tried or over-tested. In this case it is the unsatisfactory absence of both Executive Chairman and Executive Director (his spouse) for two consecutive AGMs and their high remuneration besides other critical issues as mentioned above.
The recent AGMs of public listed companies (PLCs) have indicated that shareholders’ meeting is no longer an anachronism or a dull event which, at times, could often result in varying degrees of excitement, trepidation or glee. We believe rising shareholder activism is healthy and in many ways, can make PLCs more accountable to shareholder democracy which is now a real challenge and no longer a mirage.
Abdul Wahab Jaafar Sidek
Chief Executive Officer
Minority Shareholder Watchdog Group (MSWG)
Dated: 18 December 2006
18 December 2006
On 16 December 2006, Encik Abdul Wahab Jaafar Sidek, the Chief Executive Officer (CEO) of MSWG and minority shareholders of Malton Berhad dressed down the board for the absence of their executive chairman and executive director for two consecutive annual general meetings (AGMs) as well as their excessive remuneration when shareholders received no dividends. At several points during the three-hour shareholders’ meeting, the aggrieved shareholders put pressure on the board, demanding the whereabouts of the Executive Chairman and the executive director. In the annual report, they are both substantial shareholders via a private limited company, Malton Corporation Sdn Bhd which has a 37.91 per cent stake.
Encik Abdul Wahab Jaafar Sidek pointed out that their absence did not reflect well on their attitude and their responsibility for not taking minority shareholders seriously at once a year’s shareholders’ meeting. He and minority shareholders present at the AGM found that the Deputy Chairman, chairing the AGM (also an independent director)’s explanation is totally unacceptable by saying that they were overseas and that he would convey shareholders’ sentiments to them. As he tried, chairing the AGM not even passing the first resolution in tabling the company’s financial statements, the CEO of MSWG and shareholders viewed their absence with skepticism and the chairman’s explanation unconvincing. Also noted in the directors’ profile in the annual report, the Executive Chairman has been described as the executive director’s spouse.
MSWG then brought up several critical issues to the board’s attention and shareholders followed up vociferously, demanding for answers. The most critical ones, among others, are as follows:-
- The Group’s five-year summary showed that year-on-year comparison, the group’s profit before taxation shrank by 88.7 per cent although turnover was rising by 36.2 per cent. The Group’s profit margins declined to as low as 2.6 per cent from 4.1 per cent on the back of rising operating expenses, that eroded earnings of the Group while executive directors’ remuneration kept rising;
- For two consecutive financial years ended 30 June 2005 and 2006, the Company paid tax penalties of RM3.67 million and RM3.35 million when it made a net loss of RM14.10 million in 2005 and a net profit of RM2.44 million in 2006 respectively. Shareholders could not believe their eyes that such tax penalties happened and questioned the competence of tax agents/tax advisers doing the Group’s tax computation even though the board tried to explain and relate these payments back to 2001.
- Two related party transactions comprised the insurance premium of RM800,000 paid to a company controlled by one Lim Bin Hooi, a sister of the Executive Chairman and the purchase of corporate gifts (or hampers) of RM400,000 from a company controlled by the Executive Director (i.e. the Executive Chairman’s spouse), both were absent from the AGM. The directors tried to clarify that even if such transactions were given to outside parties, the same amount of expenses would still be incurred and it made no difference whether related or not. However, the shareholders doubted, especially the purchase of corporate gifts (or hampers) whether it was necessary to be so much.
- The Executive Chairman and Executive Director were both retiring under the Company’s articles and had offered themselves for re-election while both were absent from the AGM. Their absence fumed shareholders present at the AGM to question their remuneration, demanding to slash down their remuneration to below the net profit of RM2.44 million for the year attributable to shareholders.
- MSWG also asked for clarification as to the duties and responsibilities of Executive Chairman, three Executive Directors (one of whom is his spouse) and one Managing Director in the context of corporate governance principles and best practices for the Board comprising one Deputy Chairman (an independent director) and two independent directors.
The AGM got heated, with shareholders refusing to accept the explanation for their absence and inappropriate answers provided by the board to the above issues. At this juncture, Encik Abdul Wahab Jaafar Sidek virtually advised the board to consider the necessity to adjourn the AGM which was well supported by the shareholders. He hoped that the adjourned AGM would enable both the executive chairman and executive director be present at the AGM to meet shareholders. At this stage, the Chairman (supposed to be an independent director) asked for a poll instead of a show of hands.
MSWG then took to account whether or not the chairman had conducted himself appropriately as an independent director chairing the AGM while faced with mounting objections from shareholders. The shareholders gathered that the board wanted to get over the AGM with probably proxies and the poll to see to their success easily over the aggrieved shareholders. Much arguments, persuasions and exchange of words between shareholders and the Chairman of the AGM prevailed, culminating with directors requesting to meet among themselves for ten minutes. Only then, they reluctantly decided to adjourn the AGM to another date.
MSWG is of the view that the affairs at Malton Bhd’s AGM have, if nothing else, shown that minority shareholders have ‘teeth’ and will bite whenever their patience is over-tried or over-tested. In this case it is the unsatisfactory absence of both Executive Chairman and Executive Director (his spouse) for two consecutive AGMs and their high remuneration besides other critical issues as mentioned above.
The recent AGMs of public listed companies (PLCs) have indicated that shareholders’ meeting is no longer an anachronism or a dull event which, at times, could often result in varying degrees of excitement, trepidation or glee. We believe rising shareholder activism is healthy and in many ways, can make PLCs more accountable to shareholder democracy which is now a real challenge and no longer a mirage.
Abdul Wahab Jaafar Sidek
Chief Executive Officer
Minority Shareholder Watchdog Group (MSWG)
Dated: 18 December 2006
